{"data":{"tab":"Learning","hideFromSearch":false,"keywords":"","pageCategory":"Pensions","navigationTitle":"","umbracoNaviHide":true,"blockModules":[{"content":{"subtitle":"Build for the future with a children's pension","title":"Pensions for children explained","contentType":null,"key":"78894540-5fa2-4d3f-81de-dead79e6b3fc","properties":null},"settings":{"purpleBlockStyle":false,"contentType":null,"key":"d718fdb5-1558-4bdd-af80-5748b210c21a","properties":null},"blockType":"smallHeaderBlock"},{"content":{"text":"

With investment, your capital is at risk. Taxation depends on individual circumstances. Tax rules may change.

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Put your child on the right financial path with a pension. Whether it's a Junior SIPP or other scheme, discover the rules and benefits of children's pensions with our guide. 

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Saving into a children’s pension is an excellent way to give your little ones a financial boost.

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While student loans, buying a home and car finance often take priority, setting up a Junior SIPP or other type of scheme can offer long-lasting benefits. Because of the length of time the money will be invested, even small pension contributions can grow quite substantially.

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Read on to explore how pensions for children work, the key rules to bear in mind, and the potential pros and cons.

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What is a child pension?

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A child pension is exactly what it sounds – a scheme set up on behalf of someone under 18. Parents and guardians make contributions to put their little ones on the right track for a comfortable retirement.

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These pensions usually take the form of:

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Children’s pensions share many features with those used by adults, including tax relief from the Government. Investment returns are also shielded from capital gains tax and income tax. However, they have a lower annual contribution limit, and your child won’t be able to access their nest egg for many decades.

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What are the rules for children's pensions?

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You’ll need to keep the following rules and features in mind when opening a junior pension like a SIPP on behalf of your child:

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Remember, tax rates and reliefs depend on individual circumstances and may change.

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What are the pros and cons of a child pension?

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It’s always worth weighing up the potential advantages and disadvantages before signing up for a child pension.

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Pros of children’s pensions

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Potential disadvantages

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Why choose Bestinvest for your children’s pension?

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Our multi-award-winning pension – The Best SIPP – is available to children too. Our Child SIPP offers:

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Open a Child SIPP with us

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Simply download our Child SIPP application form to open an account or call us on 020 7189 9999 for more information.

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The annual contribution allowance for a Junior SIPP is the same as for other types of child pension – £2,880. However, once tax relief of 20% is factored in, the annual limit is in effect £3,600. Just remember that tax reliefs and rates can depend on personal circumstances.

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You’ll generally need to be 18 before you can set up a personal pension or SIPP for yourself. Parents and guardians can open and manage a child pension for their youngsters, to give them a head-start. However, control is only transferred to the child when they turn 18.

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A Junior SIPP is a pension, while a Junior ISA is a tax-free savings account. A parent or guardian contributes to their child’s Junior SIPP and makes investment decisions up to age 18. With Junior ISAs, money is saved in a cash or stocks and shares account, with the child gaining control at 16 and access at 18.

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No, only a parent or guardian can usually set up a pension on behalf of a child. However, once a child pension is up and running, any adult is normally allowed to make contributions into it – including grandparents. Just stay aware of the annual contribution allowance, which stands at £2,880.

","question":"Can I set up a pension for my grandchildren?","contentType":null,"key":"c0a12a61-5d9c-44a6-900b-302b68d8ac79","properties":null},"contentUdi":"umb://element/c0a12a615d9c44a6900b302b68d8ac79"},{"content":{"anchorText":"","answer":"

Yes, money held in a pension can be inherited by your children. There will be no tax payable if you pass away before 75 with a defined contribution pension. However, income tax will be payable at your child’s marginal rate if you die at or after 75.

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If you've been thinking about setting some money aside for a little one, our article Investing for children? Here's how you can do it is a useful summary.  

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Important information

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*This figure is based on an investment return of 5% per annum after fees, compounded annually. It is an example and is not guaranteed. What you will get back depends on how your investment grows and the tax treatment of the investment. Charges may vary. Do not forget that inflation would reduce what you could buy in the future with the amounts shown. This does not constitute personal advice. Please also see the information below.

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SIPPs are not suitable for everyone. They may not be right for you if you don’t want to invest across different asset classes or don’t think you will make use of the investment choices available to you. Please contact us for guidance or advice if you are unsure.

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Find out more about saving for a child's retirement in the Best SIPP, our personal pension.

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